Ofgem proposes to remove “perceived barriers” to renewable generation

The Office of the Gas and Electricity Markets, Ofgem, which regulates the gas and electricity industries in Britain, has issued a consultation paper to attempt to remove perceived barriers which embedded generators may face in entering the generation market.

The consultation is aimed at addressing the issues involved in allowing embedded generators, those that connect to local distribution networks rather than the National Grid, including windfarms, solar power and many combined heat and power plants, to face so-called ‘shallow’ charges rather than ‘deep’ charges when connecting to the distribution network. Currently, anyone wanting to connect has to pay ‘deep’ charges – a one-off, up-front payment which can run into millions of pounds and covers the cost of replacing equipment associated with protecting the network, and can be seen as a significant barrier to market entry.

Customers pay ‘shallow’ connection charges which involves paying for the assets needed just to connect to the network, with the new consultation addressing the issues involved in allowing embedded generators to face ‘shallow’ rather than ‘deep’ charges. Key areas for consideration include getting access to the distribution network, ensuring network reliability, and the cost of connecting to the network. It takes forward the recommendations of the Embedded Generation Working Group, a joint Government and industry-working group which met last year to consider what implications the increase in embedded generation would have on access to, and the operation of, the electricity networks.

“The issues raised by embedded generation are far-reaching and complex,” commented Ofgem’s Managing Director for Customers and Supply, John Neilson . “Ofgem is committed to taking forward its important work programme to consider the opportunities for, and barriers to, the development of embedded generation while ensuring at all times a safe and secure supply for customers, and a fair and competitive market for generators – consistent with our primary statutory duty. This consultation is the first step in a full and thorough programme of review led jointly by the DTI and involving many other key parties. It identifies the principles Ofgem will consistently seek to apply and the steps which may be possible to take as early as April 2002 to encourage the development of embedded generation.”

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